Partnership for Growth

Philippines-U.S. Partnership for Growth Joint Country Action Plan

The Government of the Republic of the Philippines (GPH) and the United States Government (USG) have agreed to the new Partnership for Growth (PFG). This partnership mobilizes the resources of both governments to address the most serious constraints to economic growth and development in the Philippines. Through this enhanced bilateral engagement, the PFG will assist the Philippines achieve the goal of moving from a low growth path to a higher, sustained and more inclusive growth trajectory in line with other high-performing emerging economies. The GPH and USG plan to work together to accomplish this goal through the following objectives:

Create a more transparent, predictable, and consistent legal and regulatory regime in the Philippines, one that is less encumbered by corruption;

Foster a more open and competitive business environment with lower barriers to entry;

Strengthen the rule of law that is grounded in an efficient court system capable of delivering timely justice; and

Support fiscal stability through better revenue administration and expenditure management.

Led by key economic officials from both governments, the PFG spearheaded extensive consultations in developing this five-year PFG Joint Country Action Plan (JCAP) (PDF 735 KB), which the two governments intend to implement in accordance with their respective laws and regulations. Informed by current research and field assessments, a GPH and USG economic team conducted an analysis of the binding constraints to growth in the Philippines to prioritize key interventions to be undertaken by the PFG. The growth diagnostics and constraints analysis study provided a guide in developing a focused strategy intended to maximize the impact of development efforts. This assessment identified weak governance and narrow fiscal space as the two binding constraints to growth. These findings align with the priority reform areas of the GPH’s Philippine Development Plan (PDP) 2011-2016. Based on this constraints analysis, this PFG country plan consists of three inter-related themes of development intervention: Regulatory Quality, Rule of Law and Anti-Corruption, and Fiscal Performance.

For regulatory quality, the PFG seeks to promote an environment attractive for investment, trade, and private sector growth. The GPH seeks to attract more investment and boost trade by reducing the cost of doing business, encouraging market contestability, easing regulatory processes, and engaging the private sector in economic reforms. The GPH strategy targets growth in priority sectors, such as tourism, agribusiness, infrastructure, logistics, mining, and manufacturing. In response, PFG initiatives seek to support measures to reduce the cost of doing business, improve the investment climate, ensure GPH import regulations are consistent with internationally accepted standards, enhance human capacity to support high-growth sectors, and ease restrictions to market entry. In addition, PFG efforts aim to facilitate economic integration and meet the country’s commitments under the ASEAN Economic Blueprint, which outlines concrete targets for establishing a single market and production base in the ASEAN region by 2015. Other PFG efforts include support for trade and investment-related policy reforms needed to improve Philippine readiness to qualify for entry into other multilateral and bilateral trade agreements such as the Trans-Pacific Partnership (TPP) agreement. These PFG activities expect to contribute to an enhanced investment climate and cross-border trade for the Philippines.

To strengthen the rule of law, the PFG seeks to enhance judicial efficiency. The GPH undertakes to improve the timely resolution of court cases, particularly those that significantly undermine trade, the investment climate, and business confidence. This PFG component aims to support the GPH in implementing a comprehensive docket cleansing effort to identify priority areas for court decongestion. PFG efforts seek to enhance the ability of justice sector institutions in resolving commercial disputes and financial crimes. PFG initiatives will also aim to assist the GPH in improving contract enforcement and enhancing avenues for alternative dispute resolution. PFG initiatives also strive to strengthen accountability mechanisms in the justice sector. This support for the rule of law is intended to contribute to a more efficient court system and timely delivery of justice.

The PFG seeks to lower the incidence of public sector corruption. The GPH seeks to reduce opportunities for corruption and increasing its punitive risks, particularly for large-scale cases. As a member of the Open Government Partnership, the Philippine government intends to strengthen transparency and accountability mechanisms by expanding avenues for citizen participation. In response, activities in this PFG component seek to enhance anticorruption institutions. In addition, PFG efforts endeavor to expand integrity initiatives of the private sector, particularly in business interactions with the government (e.g., tax compliance, public sector procurement). PFG efforts also aim to assist the Philippine government enforce compliance with the Anti-Red Tape Act to prevent corruption. These efforts are expected to mitigate corruption in business activities in the Philippines.

In fiscal space, the PFG seeks to address insufficient revenue generation, reduce tax leakages, and improve expenditure management of GPH agencies. The GPH has prioritized fiscal reforms as part of overall efforts to maintain macroeconomic stability and pursue tax policy reforms to achieve its fiscal revenue targets. To complement these initiatives, PFG initiatives are intended to provide GPH support to undertake tax policy reforms to broaden the tax base and expand tax collection efforts. PFG efforts also aspire to address GPH revenue shortfalls resulting from tax/duty evasion and smuggling. PFG efforts also aim to support measures to enhance transparency and accountability in the allocation and utilization of the budget. These PFG efforts are meant to strengthen the fiscal position, allowing the GPH to increase public spending in priority areas such as infrastructure, health, and education.

Over the next five years, the PFG anticipates producing a transformative impact in the Philippines. This enhanced engagement constitutes an unprecedented GPH-USG inter-agency collaboration guided by a focused strategy maximizing the impact of development efforts. Anticipated outcomes should be benchmarked against baseline economic statistics, a select list of middle-income countries, and high performing emerging markets, particularly regional neighbors. The PFG benchmarks and indicators align with the priority elements of the PDP: higher GDP growth; a decline of poverty incidence; annual growth of more productive (i.e., formal sector) employment; and increased GDP per capita.

Over the life of the JCAP, the PFG is intended to build a range of assistance partnerships to leverage its development investments through public-private alliances and by coordinating with the donor and NGO communities for the efficient use of resources. GPH contributions include national and local government support, in-kind amounts of GPH staff time, office space, and equipment. These contributions should be further discussed as part of succeeding bilateral agreements between the GPH and USG.

The success of PFG requires strong and sustained levels of engagement from both the GPH and USG. This partnership demonstrates GPH commitment to economic reform to foster a more conducive investment environment. From the USG, this engagement reflects the strategic importance of the Philippines as a staunch ally in the Asia Pacific region. In making PFG a success, various USG agencies intend to provide the necessary financial and non-financial resources to assist the Philippines in addressing its binding constraints to growth, in accordance with applicable laws and regulations. Both the GPH and USG recognize the need to engage and inform the private sector and the public about the partnership, in order to mobilize support for PFG activities.

The JCAP (PDF 735 KB) remains flexible and should be reviewed annually, in order to make on-course correction and adjustment for subsequent implementation. Composed of Co-Chairs from both the GPH and USG, a PFG Joint Steering Committee will be established to provide policy direction and monitor the overall implementation process. Meeting every six months, the GPH-USG Steering Committee will aim to assess progress on both USG and GPH initiatives and collaborate among participating agencies and civil society organizations. A PFG Secretariat plans to provide technical and administrative support to the Steering Committee. Three technical working groups will be organized: Regulatory Quality, Rule of Law and Anti-corruption, and Fiscal Performance. The PFG Secretariat and Technical Working Groups will be based in Manila.